Friday, June 23, 2017

The seemingly never-ending record run for stocks doesn't mean the Trump rally is on solid footing, according to perma bear Peter Schiff.

"I think the trade has unraveled a bit," the Euro Pacific Capital CEO said last week on CNBC's "Futures Now."

Last week, stocks set new all-time highs, as investors shrugged off a weaker-than-expected May jobs report and remained at least partly motivated by elements of President Donald Trump's policy agenda. However, one of Wall Street's most relentlessly bearish voices was unimpressed.

"Remember that early in the Trump trade, you had a strong dollar. The dollar has surrendered 100 percent of its gains post-Trump's election," Schiff told CNBC. Additionally, "year to date the S&P is up, [but when] priced in gold the S&P is actually down."

So instead of staying in the U.S. stock market, Schiff is urging investors to buy bullion, which "is up more than the Dow and more than the S&P," with the yellow metal having rallied 11 percent this year. Gold rose to its highest price since the end of April on Friday, thanks largely to the continued drop in the U.S. dollar.

Meanwhile, Schiff said it's also time to look overseas, as foreign markets are actually outperforming the U.S.

"The U.S. markets have been pretty steady while foreign markets have been much stronger, [with emerging markets also being very strong," he said. "I expect this trend to continue and I think it will accelerate in the second half of the year."

In fact, while the S&P 500 Index is up almost 9 percent this year, Wall Street analysts have started urging investors to look at Europe, also up 9 percent year to date. Emerging markets, however, have soared over 19 percent so far in 2017.

But Schiff says more trouble could be ahead for the markets, especially given the Federal Reserve's next actions. While the CME Fedwatch Tool is predicting an over 90 percent chance that the Fed will hike rates during its meeting next week, Schiff doesn't expect any more hikes after June, which could damage the market.

"Even though the Fed claims to be data-dependent and they hike interest rates [in spite of weaker than anticipated data], I think the markets are starting to look beyond the hikes to the cuts," said Schiff. "I think we're getting ready to start a new easing cycle."

Schiff had previously cast doubt on the number of rate hikes. In February, the ardent Trump critic had pointed out that economic data was weaker than anticipated, blaming the Fed for Trump's election.